Bank of Canada statement and MP highlights
- Output gap now expected to close in first half of 2018 compared to 'around mid-2018' in January forecast
- Growth has been faster than expected but too early to conclude economy on sustainable path
- Sees 2017 growth at 2.6% from 2.1% prior
- Sees Q1 at 3.8% compared to 2.5% prior
- Sees 2018 growth at 1.9% vs 2.1%
- Sees 2019 growth at 1.8%
- Growth expected to moderate but remain above potential during the rest of the year
- Growth temporarily boosted by resumption of spending in energy sector and child-benefit cheques
- Lowers neutral policy rate estimate to 3% from 3.25%
- Lowers expect growth forecast to 2.5% from about 3% over policy horizon due to uncertainty about US policy
- Headline inflation at 2% is largely due to transitory effects, three measure of core drifting lower
- Global growth strengthening, become more broad based than expected in January
Key part of the statement:
"The Bank's Governing Council acknowledges the strength of recent data, some of which is temporary, and is mindful of the significant uncertainties weighing on the outlook. In this context, Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent."
That compares to the prior statement:
"The Bank's Governing Council remains attentive to the impact of significant uncertainties weighing on the outlook and continues to monitor risks outlined in the January MPR. In this context, Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent."
USD/CAD traded at 1.3307 before he news. This is CAD-positive. The initial dip was to 1.3272 but it's back at 1.3294.
